By Tiernan Ray

Shares of wireless broadband provider Clearwire (CLWR) are up 7 cents, or 3.3%, at $2.19 this afternoon after RBC Capital‘s Jonathan Atkin raised his rating on the shares to Sector Perform from Underperform, with a $2.50 price target, up from $1.50 previously, writing that the imminent arrival of Japan’s Softbank into the U.S. market for cellular through Sprint-Nextel “increases the possibility of a Sprint/Clearwire combination” and therefore provides downside support for Clearwire shares.

Atkin thinks there’s a chance Softbank will want to spread its unique flavor of “long term evolution,” or LTE, 4G wireless technology in the U.S. market by using Sprint to control Clearwire, and he puts a price tag on Clearwire’s spectrum holdings:

Following the anticipated close of the Softbank/Sprint transaction in1H13, we believe a Softbank-controlled Sprint may seriously considerbolstering its spectrum position potentially via an acquisition of Clearwire or apartnership with DISH. • Given Softbank’s comfort with operating the identical TDD-LTE technology at the same frequency band (mid 2 GHz) that Clearwire intends to deploy, we believe a Softbank-controlled Sprint could seriously consider the Clearwire option. Our new price target of $2.50 (previous: $1.50) is based on a $0.25/MHz-POP valuation of Clearwire’s spectrum (previous: $0.20/MHz-POP), which we find plausible given the Softbank’s financial resources and, in our view, potentially lower price sensitivity vs. other strategic buyers.

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There are 4 comments

NOVEMBER 8, 2012 4:02 P.M.

Sp Rob wrote:

Most of these analysts are just #$%$ who catalyse the momentum of the pps based on bad or good news. Most of the time they are after the fact. Atkins has no idea of the spectrum value. McCaw and many others themselves said a couple of years back that the spectrum value could be in excess of $60B - maybe they were extrapolating at the time but Clear issued a statement recently saying the upper end est. is $33B and low end at $11B. MK's recent letter on excess spec. value confirms the same (and some articles from seeking alpha). Now that Clear seems to be on the verge of being acquired he tries not to contradict himself by putting a low $2.5 est on the pps. He thinks that he is supported by McCaw's recent class A sale but he forgot about the "make whole" and class B value of $13.98. When class B is converted to class A it is done on a 1:1 ratio volumewise , so any simultaneous sale of A+B at different price points actually warrant an equal pricewise treatment . This is because if the buyer who now buys B at a higher price($13.98), say, wants to convert to class A($2) tomorrow for sale - will he sell it for $2 on the open market after converting?. The McCaw deal was totally lopsided and even if equal parity was not followed, A should have been $13.98 and B $2 .
Atleast a merged average of (13.98 + 2)/2 pps of A = 8 , B = 8 should have been taken along with the "make whole" clause.

NOVEMBER 9, 2012 2:04 P.M.

Spok wrote:

2 years ago, most analysts placed CLWR's spectrum value at roughly $10 to $20 billion. Since that time, clearwire has been open to selling excess spectrum but hasn't, simply because they want it's full value.

Further, the value is increasing every year... arguably FASTER than the company's "burn rate". Not only is less spectrum now available as lightsquare goes kapoot and the cables sell out to Verizon, but demand is soaring and the world is swarming around clearwire's 2.5 ghz band as the global standard for data transmission.

That said, I would add 20 to 40% to the value that analyst's ascribed to the value of Clearwire's spectrum 2 years ago... especially as Verizon switches on LTE-Advanced a year or so from now and everybody else realizes that spectrum is even MORE essential to compete... from the usual demand perspective, but also from the performance envelope that Verizon will be pushing as LTE-Advanced becomes reality next year.

NOVEMBER 10, 2012 2:57 P.M.

Sp Rob wrote:

Darn right!. Check out the spectrum chart from seeking alpha's recent article "Clearwire: To Buy Or Not To Buy Today?"http://seekingalpha.com/article/939691-clearwire-to-buy-or-not-to-buy-today
Excerpt "Now looking at that little chart above changes everything about Clearwire. Why? Clearwire's entire Spectrum is in BLUE. Meaning its all available for 4G, or 5G or whatever, they want to put on it. Look at all the other telecoms Spectrum holdings. Their entire Spectrum is almost all black, meaning its all tied up in 3G or 2G or whatever other stuff is congesting their network pipes. How valuable is it?". Case closed.

NOVEMBER 10, 2012 3:00 P.M.

Sp Rob wrote:

Absolutely right!. Check out the spectrum chart from seeking alpha's recent article "Clearwire: To Buy Or Not To Buy Today?"http://seekingalpha.com/article/939691-clearwire-to-buy-or-not-to-buy-today
Excerpt "Now looking at that little chart above changes everything about Clearwire. Why? Clearwire's entire Spectrum is in BLUE. Meaning its all available for 4G, or 5G or whatever, they want to put on it. Look at all the other telecoms Spectrum holdings. Their entire Spectrum is almost all black, meaning its all tied up in 3G or 2G or whatever other stuff is congesting their network pipes. How valuable is it?". Case closed.

About Tech Trader Daily

Tech Trader Daily is a blog on technology investing written by Barron’s veteran Tiernan Ray. The blog provides news, analysis and original reporting on events important to investors in software, hardware, the Internet, telecommunications and related fields. Comments and tips can be sent to: techtraderdaily@barrons.com.